Business Report

Kenya Tries to Build Its Silicon Valley

The country hopes a budding digital technology industry will help drive its economic ambitions, but is a multibillion-dollar government-built “Silicon Savannah” the key to success?

Mombasa Road, the congested, potholed artery that links Kenya’s capital, Nairobi, to its coast, is an unlikely gateway to one of the most ambitious technology developments in Africa. Heading southeast from the capital, it skirts Nairobi’s industrial fringes before entering a world of big, cloudless skies and open savannah: a scene that seems fit for a postcard, though not quite ready for its planned future as a high-tech corridor.

The site of Konza Techno City, where the government of Kenya has plans to build an IT-focused “smart” metropolis.

Heavy-equipment vehicles along the roadside 60 kilometers from Nairobi herald the spot as the future Konza Techno City, an IT-focused “smart” metropolis envisioned by local leaders. Over the next 15 years, through a mix of public and private investment, authorities in this country of 46 million people plan to transform the 5,000-acre stretch of grassland into a “Silicon Savannah,” a city of 200,000 with world-class facilities for higher education, life sciences, business process outsourcing, and telecommunications.

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Inspired by Silicon Valley and similar tech clusters in India, the Philippines, and Egypt, Konza is an important element of Kenya’s national development framework, which aims for annual economic growth of more than 10 percent through the year 2030. But since it was approved in 2008 by the government of then president Mwai Kibaki, the project has struggled through years of delays. Now finally under construction, it still faces many problems, among them a seemingly insurmountable budget shortfall and mixed feelings in the Kenyan tech community.

In the years since the plans for Konza were first hatched, Kenya’s technology sector has blossomed quite independently. Its home is not a planned development but a busy stretch of Nairobi’s Ngong Road. A dense ecosystem of digital startups, incubators, and accelerators is thriving here despite city rents, snarling traffic, and ever-present diesel fumes.

Kenya’s true tech center is “a corridor in Nairobi that nobody asked permission to build,” says Mark Kaigwa, a local entrepreneur and technology strategist. “This is where anyone invested in the tech ecosystem here wants to call home.”

The grassroots development of Kenya’s IT sector has been made possible by better, more affordable technology, including a boom in inexpensive mobile phones, as well as the landing of four undersea fiber-optic cables, beginning in 2009, that reduced the country’s cost of bandwidth by more than 80 percent.

Local innovations include M-Pesa, the pioneering mobile-money service used today by more than half of Kenya’s adult population, and Ushahidi, an open-source crisis-mapping program that has aided the response to disasters around the world.

Developed by a group of Kenyan activists, programmers, and bloggers, Ushahidi was created to help eyewitnesses document reports of violence in the wake of the country’s disputed 2007 presidential election. Three years later, one of Ushahidi’s founders, Erik ­Hersman, was one of the first to open up shop on Ngong Road, launching the iHub, a community space for aspiring tech entrepreneurs. Since then, the Ngong Road corridor has helped incubate several notable innovations, including the mobile-phone apps iCow and M-Farm, which help farmers keep track of livestock and access up-to-date market information, and the e-commerce firm Weza Tele, purchased earlier this year for $1.7 million, the largest acquisition of a Kenyan technology startup to date.

Global technology giants have also been drawn to East Africa’s largest economy. Google, Microsoft, and Intel all have operations in other areas of Nairobi, as does IBM, which chose the city to host its inaugural global research lab on the African continent.

With big and small tech thriving already, where does Konza fit in?

Bitange Ndemo, a University of Nairobi professor and former permanent secretary of Kenya’s ministry of information and communication, who was one of Konza’s original proponents and has been embroiled in some controversy over his role, says Kenya still needs a place that can draw industry, academia, and government together. For all the vibrancy of Nairobi’s existing technology corridor, Ndemo says, the transition from financially squeezed startups to large-scale employment-­generating enterprises demands greater support from the state and closer integration of entrepreneurs and members of the research community outside Nairobi, which is already too congested and expensive.

Translating the Konza vision into reality has been made difficult by excessive bureaucracy, burdensome procurement procedures, and poor coördination. Like any government effort, Konza is dependent on political will, and the elections of March 2013 brought a new administration to power that is widely seen as less committed to the project. Local counties are in a turf war over Konza’s boundaries. The alleged theft of 179 million Kenyan shillings ($1.8 million) during the government’s 2009 purchase of Konza’s land led to the indictment of nine individuals involved with the deal, including Ndemo. (Ndemo has denied the charges, which included theft and abuse of office; on October 7 Kenya’s High Court declared the trial unlawful and ordered prosecutors to stop the case.)

Konza’s single biggest challenge is money. The city’s first phase of construction, covering 410 acres and due to be completed by 2020, will cost approximately $750 million. Rough estimates suggest that infrastructure for the entire city could run more than $10 billion. Yet while plans call for the bulk of this to be financed by the Kenyan government, the entire 2016 budget for the Konza Technopolis Development Authority, the state entity in charge of the project, is just 810 million Kenyan shillings ($8 million).

Despite the precarious finances it faces, Konza’s site along Mombasa Road is finally making tangible progress. Since mid-2014, when the Kenyan government brought in the California-based firm Tetra Tech to oversee the first phase of Konza’s development, work has commenced on the city’s water supply, access roads, and an initial fiber-optic trunk line. Future tenants have not been ready to commit to the project, but officials say that more than 360 potential investors, both foreign and local, have submitted expressions of interest and that the agency is currently in negotiations with a Korean technical university to establish a Konza branch. The Nairobi-­based firm Craft Silicon, which provides banking and mobile money solutions to more than 40 countries in Africa and Asia, is also in talks with officials over a 10-acre plot of Konza land where it envisions establishing a software campus.

Given Konza’s remote location, and doubts over the current government’s commitment, many within Kenya’s tech community remain skeptical. Yet Mugethi Gitau, a tech blogger and community manager formerly with the iHub, is among those who can envision a future for Konza as an attractive space for startups, particularly if it offers affordable housing, open Wi-Fi, and a “healthy cross section” of tech and business talent. Kamal Bhattacharya, director of IBM Research Africa, says it’s too early to outline any specific commitments to the city, but he sees potential in the Konza concept, noting the “tremendous impact” that similar special economic zones have had elsewhere in the world.

The Bangalore site of IBM Research India is one example. In Bangalore, “there was this huge density of multinationals, local companies, and everyone gathering together which created tremendous economic value,” he explains, describing the site as having developed into a magnet for talented developers and IT professionals. “I don’t see this happening overnight in Kenya,” he says, “but you can only hope it will eventually succeed.”

Cause for optimism can be found at Malili, a truck stop of a town along Mombasa Road near Konza, where Jackson Maweu brokers nearby plots of land from a small shed made of wood and corrugated metal. After the government purchased the Konza site in 2009, Maweu says, speculators rushed to snatch up plots in the vicinity. Yet over time, interest dried up and land values eroded as the Konza property sat idle. Since mid-2015, however, when work began on Konza’s access roads, prices of some plots have more than doubled.

“Two years ago, you could not convince anyone that Konza would be constructed,” says Maweu. “Now that things are happening, people are starting to believe that this is real.”

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